Quebec's Power Corporation had shares in Chinese company cited in Panama Papers

Until last year, Quebec's Power Corporation owned stocks in a Chinese company that regularly used the services of Mossack Fonseca, the Panama-basedlaw firm at the centre of the data leak scandal that exposed the tax-avoidance practices ofthe rich and famous.

The Panama Papersmillions of leaked documents shared by the Washington-based International Consortium of Investigative Journalists with media partners including CBC Newsreveal the company, CITIC Pacific, has incorporated dozens of subsidiaries in known tax havens, mainly in the British Virgin Islands.

Documents isolated by CBC's French-language service, Radio-Canada,show Mossack Fonseca helped CITIC Pacific with either managing or setting up more than 90 subsidiaries.

Since the massive leak first made headlines, the Panamanian law firm has maintained there is nothing illegal in setting up offshore shell companies, and said its practices meet the highest international standards.

None of the information compiled by Radio-Canadaindicates any illegal activity concerning CITIC Pacific and its subsidiaries.

Links to Power Corporation

Annual reports revealthat Andr Desmarais, a directorof Power Corporation, the international management company built by his father, was alsoa boardmember of CITIC Pacificfrom 1997 to 2014.

During Desmarais'stenure on the CITIC Pacific board,Power Corp. accumulatedshares in the Hong Kong-based holding company, which works mainly in the steel, iron-ore mining and real estate sectors.

Power Corp. remained a minority shareholder of CITIC Pacific,at one point holdingseven per centof the company's stocks, for a total of $855 million, according toPower Corp.'s2007 annual report.

The Quebec corporation sold all of its shares in April 2015.

Use of tax havens raises questions

While setting up shell companies in tax havens is not illegal, it does raise questions forfiscal expert Marwah Rizqy, a professor of tax lawat the Universitde Sherbrooke.

"What's the purpose of creating subsidiaries in tax havens when the parent company generates profits in China?" Rizqy asked.

"Why would a Chinese company, which has the Chinese government as a majority shareholder, thinkit makes sense to become incorporated numerous times in the British Virgin Islands?"

Power Corp. redirects questions

When Radio-Canada tried to contact Andr Desmarais, it was told in an email to direct all questions to the Chinese company, since Power Corp. no longer holds any shares in CITICPacific.

Radio-Canada'squestions "are related to operational matters that should be directed to that company's management," the email reads.

The email goes on to reiterate that Power Corp. follows all the laws and regulations to which it is subject.

CITIC Pacific, which nowgoes by the name CITICLimited,sent a written response stating: "As a conglomerate with a wide-reaching global presence, we have a variety of corporate entities in different jurisdictions. The activities of these entities are in full compliance with the law of these jurisdictions and subject to regular internal review."